GMAC-RFC began marketing a new German backed true-sale mortgage securitization in the ashes of its parent, General Motors Corp.'s blow-out. GMAC-RFC plans to sell between 250 million and 300 million ($320.9 million to $385.1 million) of German home loans originated by its mortgage-financing unit based in Germany. The deal will be GMAC-RFC's first euro securitization following the GM and GMAC downgrades and Deutshce Bank Securities is lead manager on the deal.
The structure will incorporate true-sale but some sources question why the originator hasn't held off for the upcoming changes expected to facilitate the arrangement of German true-sale mortgage securitizations. "The structure seems really sophisticated to do," said one market source. "I would assume that because of current legislation the transaction will ensue an offshore SPV."
Although Germany has seen true-sale legislation passed, there are still issues with the securitization of mortgage loans that have yet to be sorted (see ASR 10/18/04). The purpose of the pending new legislation would be to eliminate insolvency, enforcement and regulatory hurdles for German true-sale securitizations and ensure that insolvency remote SPVs may acquire, by means of a German law true sale, the assets which make up the collateral in an asset-backed securitization or other refinance transaction.
The pending changes would relax the requirement for registering mortgages that are securitized - both a costly and time consuming procedure. Under the draft legislation, banks would be able to create a private register whereby the banks would not have to transfer the mortgages in order to achieve insolvency remoteness of a true-sale structure.
"The plan of the German legislator to implement refinance registers (i.e. a mortgage and land charge register which could be used for MBS transactions) is under delay," said Ralf Hesdahl at Mayer, Brown, Rowe & Maw. "If all is going well, the refinance registers could be in place by the end of 2005. Until the planned refinance registers have been implemented, the originator needs either to transfer mortgages and land charges to the issuer/originator - a costly procedure - or the investors/rating agencies have to rely on transfer triggers." Hesdahl said he expected to see a significant increase in German true-sale MBS transactions as soon as the refinance registers are implemented, since the planned measures will allow much more cost effective true-sale structures than presently.
But left with limited financing alternatives, GMAC-RFC will look to the securitization market as a key source of funding, said sources. "I think it's a testament to how important accessing the securitization will be now that GM will find it harder to raise financing in other markets," said one market source.
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